By many accounts, 2014 was a year of unprecedented economic growth. In the second quarter of this year the GDP grew by 4.6 percent, in the third quarter it grew by 3.5 percent. The stock market continues to climb ever higher – both the Dow and S&P 500 closed at record highs in October. Most importantly, the unemployment rate is now 5.8 percent, the lowest it’s been in six years. But in a recent poll, the average answer Americans gave to the question “Out of every 100 people of working age, how many do you think are unemployed and looking for work?” was 32. Americans think the unemployment rate is 32 percent. On top of that, 72 percent of Americans think the economy is still in recession, when the recession actually ended in 2009.
According to exit polls, 45 percent of voters listed the economy as the most important issue influencing their vote. Seventy percent believed the economy is in bad shape, while 78 percent worried about the economy’s direction in the coming years. Thirty-one percent believed the economy is getting worse, while nearly three quarters of voters said their own financial situation was no different or worse than it was two years ago.
Voter misunderstanding of the unemployment rate is not simply a matter of poor information or confusion — it’s a clear indicator that average Americans still don’t feel the effects of recovery. They expressed that frustration in the midterm elections, thoroughly renouncing Democratic Party control. The midterm results, despite a supposedly surging economy that should have helped Democrats, indicate a disconnect between the stellar economic statistics and the true beneficiaries of this unprecedented growth.
This has been the longest continuous streak of job growth on record. Usually, a healthy economy leads to higher approval ratings for the president in office. However, President Obama’s approval currently stands at 41 percent, the lowest since he took office. And this low approval is considered one of the dominant factors in the huge Democratic defeat in the midterm elections. Thirty-four percent of voters said they were voting to show their opposition to the President.
Presidents always become unpopular in their sixth year, and thus fare poorly in the midterm elections. This is a phenomenon political scientists have dubbed “the six-year itch,” and it has affected nearly every president in recent memory. Obama, Bush, Bush Sr., and Reagan were all in some way hurt politically in their sixth year. Curiously, Bill Clinton actually gained seats in his sixth year, although this is normally attributed to the unpopularity of House Republicans during the impeachment scandal. Nobody fully understands the reasons behind the six-year itch, but it seems to be immune to macroeconomic growth, which under normal circumstances would help the president’s party. A rapidly growing economy, normally a good indicator of presidential approval, is not helping this president, as he continues to see his approval ratings slip lower.
In an interview on Face the Nation on November 9, President Obama blamed a failure of his administration, and the party, to effectively sell his policies to the public. And to some degree, he’s right. Democrats relegated President Obama and much of his administration’s accomplishments to the backburner throughout the campaign season. However, he fails to recognize that his policies may not be reaching all Americans. The president’s message — that the economy is doing well, thanks to him — doesn’t resonate with most Americans, and that’s a problem that runs deeper than a simple failure in messaging. Democrats are doing worse among middle- and low-income voters, many more of whom voted for the GOP in the midterms than in 2012. The political consequences of this unequal recovery for the Democratic Party should not be understated.
Middle- and low-income Americans aren’t experiencing benefits from the nation’s economic growth. The wealthiest Americans have been the primary beneficiaries of President Obama’s economic policies, while middle-income families have seen stagnating wages and rising costs of living. This chart by Pavlina Tcherneva shows the distribution of gains to the bottom 90 percent and top 10 percent in every period of economic growth in the last century. While earlier growth periods primarily benefitted the bottom 90 percent, since 1982 a disproportionate amount has gone to the richest Americans. And in the most recent growth period, the one starting in 2009, the incomes of the bottom 90 percent have actually fallen. The top one percent received 95 percent of the gains in the first three years of recovery. Adjusted for inflation, median net household worth is lower than it was in 1989. Median household income in the US is still 8 percent lower than it was before the recession, and 9 percent lower than its peak in 1999. Even the 2000s, with unprecedented economic growth, middle class incomes largely remained stagnant. During the recession, they declined. Median income is $2,100 lower than when President Obama took office in 2009.
For families in the middle 20 percent of incomes, net worth dropped 17 percent between 2010 and 2013. While inflation is low at less than two percent: too low, according to the Federal Reserve. Many price increases hidden by the Consumer Price Index disproportionately affect middle class families. So while the prices for items like electronics and clothing have gone down, many large expenses have skyrocketed. This reality is obscured by the way the CPI is determined, which weights cheaper, frequent purchases more heavily. A study by the Center for American Progress found that the combined costs of child care, housing, health care, and education climbed 32 percent from 2000-2012, adjusted for inflation.
The GDP growth this year was also in part fueled by a surge in military-related production. Likely spurred by the escalating airstrikes against ISIS, this unexpected surge in defense spending led to a quarterly report that was higher than many economists expected. Growth in consumer demand, a more accurate measure of middle-class economic health, declined in the third quarter.
The low unemployment numbers also mask negative aspects of the recovery. While far more people are employed than during the recession, an estimated seven million Americans are stuck working fewer hours than they want. The increase in part-time labor has been a hallmark of the recovery, but goes unrecognized by statistics that fail to measure underemployment alongside unemployment. The current number of full-time workers actually remains roughly two million below what it was before the recession.
Much has been written about the causes of Democratic failure in the midterm elections this year. A map favorable to the GOP, the six-year itch, and a failed Democratic message have all been blamed. But some factors missing from these debates are the economic reasons for middle class discontent. Voters have made their frustration clear in the midterms. The challenge now for the GOP is to address these issues, or they may face a similar rejection come 2016. Claims about the health of the economy — high GDP, a soaring stock market and more — increasingly ring hollow for middle-class Americans, and for good reason. Yes, Americans are wrong when they believe the unemployment rate is 32 percent. But they are understandably skeptical of claims that the economy is doing better than ever when most of the recovery has still failed to significantly improve the lives of millions of Americans.